Ann: Field Operations Update, page-16

Step back a decade or so and Cottee, Kelemen and Young were pioneering unconventional energy plays in Eastern QLD. There was no infrastructure and many would have thought no chance, a few years later QLD was in a boom period with $40-60 billion dollars being thrown at it as by then tier one companies raced to get their fields developed and pipelines plus plants built to supply energy to the Asian markets. Keep in mind the many of the billions needed came from the energy hungry Asian companies such as KOGAS.

EXR are on China's doorstep with a multi TCF prospect, if successful the field will likely be developed by Asian labor instead of top priced Aus labor, the environmental plans, the pipelines, powerlines and general engineering will be largely done by Asian labor. There will be no LNG plants required with just a pipeline needed to connect their energy to one of the worlds largest and highest value consumers. A project in Mongolia to bring energy to China will cost significantly less that a project of the same scale in Australia. With this in mind the goal posts for a field that is worthy of development will be notably closer. We won't IMO need a world class field such as Fairview in QLD to be economically viable as the cost per TJ to develop will be lower while the value per TJ higher. From the early information available EXR do not have a second rate field, they have a large area with known coal seams of ideal depth and thickness, coals known to host high methane concentrations and well saturated coals.

When you consider this it's easy to see why we have attracted some of the best in business, the risk v's reward is I believe unparalleled on any ASX listed oil and gas company. Of course at sub $25m MC it's not without risk. The gas may not move, the seams may not be as thick as expected, the saturation may be lower than expected etc etc. What is however abundantly clear is that if the indications that have attracted a first class team and investors such as myself to this project are proven then this will not be a sub $25m company, in fact it's hard to imagine it being a sub $250m company.

Late September-Early October the theory and research that has bought us all here get their first acid test, pass the test and the rerate begins. It took Cottee and co 8 years to get QGC from $20m MC to $5.7b takeover, it's very early days here...